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Illustrate graphically an aggregate demand/aggregate supply of an economy in an inflationary situation. Graphically show the GDP gap.

Illustrate graphically an aggregate demand/aggregate supply of an economy in an inflationary situation. Graphically show the GDP gap. How can the Federal Government help to reduce the inflationary gap moving the economy back toward full employment using demand side fiscal policy. Account for the role of the fiscal multiplier or spending multiplier in the answer. Draw graphically the policy prescription chosen. What is the potential impact, if applicable, on interest rates, the budget deficit and the trade deficit? Explain your answer

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